regarding the first link, in which Uber jumped fares during Hurricane Sandy - People who think price gouging have obviously never given the consequences more than a moments thought. He even mentioned that Uber reported the supply of drivers went up 50%. Isn't that a major, important factor. The author just blows
it off and calls the Uber evil. fuck that. I'd rather know that a service is going to be available, but at a higher price than to not have the service available at all. Supply and demand is economic law, bitches.
Price "gouging" is actually a public service, it LITERALLY SAVES LIVES. It ensures that needed materials find their way to the people that need them the most. If I'm reasonably well stocked on batteries, and a business isn't allowed to raise prices during a hurricane, I have no dis-incentive from clearing off the shelf and buying all of them. However if the prices get jacked up, I won't buy them if I don't need them. It also provides an incentive and encourages people to be well prepared.
Price "gouging" is actually a public service, it LITERALLY SAVES LIVES. It ensures that needed materials find their way to the people that need them the most.
Seriously? The lower income people living on Staten Island during Sandy would like a word with you. Price gouging ensures that things are only available to people with excess income to absorb the gouged price.
The whole point about price gouging during Sandy is that it was an exceptional event, and maybe not one we should leave to market forces. If every grocery store tripled the price of bottled water and essential supplies then many people would be unable to afford them and starve. How is that a good thing?
If every store tripled the price of bottled water you would have truckloads of water arriving within 24 hours with absolutely no government intervention at all.
It would also mean that smart entrepreneurs would pre-stage needed supplies in anticipation of the price increase. With strong 'gouging' laws, there is no incentive to spend money on preparing the supply chain or in spending more money to overcome supply difficulties (i.e diverting supplies from elsewhere, rushing delivery, etc)
Price 'gouging' contains the seed of its own destruction because it encourages over-supply and subsequently lower prices.
> If every store tripled the price of bottled water you would have truckloads of water arriving within 24 hours with absolutely no government intervention at all.
In natural disaster scenarios, this is likely impossible as delivery infrastructure usually goes down for some period of time. This is why price gouging is successful for the businesses raising prices in first place.
> It would also mean that smart entrepreneurs would pre-stage needed supplies in anticipation of the price increase.
Businesses do not do a good job of stockpiling resources for exceptional events that happen once in many years and many businesses view this as a cost that is not worth paying.
> With strong 'gouging' laws, there is no incentive to spend money on preparing the supply chain or in spending more money to overcome supply difficulties (i.e diverting supplies from elsewhere, rushing delivery, etc)
There is no incentive in general since there is an very low probability that work on on delivery and supply channels will actually pay off as it is a low probability that a disaster scenario will happen in the first place.
> With strong 'gouging' laws, there is no incentive to spend money on preparing the supply chain or in spending more money to overcome supply difficulties (i.e diverting supplies from elsewhere, rushing delivery, etc)
Most historical examples of price gouging never worked out this way. On a logic basis, this doesn't make sense as the point of price gouging is to maximize revenue from sale during a short window of time while new supplies and materials cannot make it to the area where you are selling the now highly priced goods.
The utility of 'price' (whether it involves "gouging" or not) is to signal the entire marketplace regarding the current state of supply vs. demand. The market is dynamic and responds to the signal.
If you attempt to legislate the rules regarding price you are making it illegal to respond to the signal. This just leads to oversupply and legally enforced profit (the price is too high) or shortages and legislative enforced queues and delays (the price is too low).
> The market is dynamic and responds to the signal.
W.r.t to price gouging, this is the thing that doesn't happen or doesn't happen quickly enough and means people who can't afford the new high price go without. For essentials like food, water, batteries in a no power situation, etc. that is a huge problem.
How 'quickly' is not quick enough for you? Companies like Walmart and Home Depot are getting pretty darn good at responding to disasters, especially for things like hurricanes where there is considerable lead time.
Smaller events like tornados are much easier to respond to because they are localized.
Price gouging laws negate any sort of systemic planning to take advantage of short-term price spikes. Eliminate the laws and you open up opportunities for creative businesses to plan and respond to these short-term opportunities.
If every store tripled the price of bottled water you would have truckloads of water arriving within 24 hours with absolutely no government intervention at all
In post hurricane road conditions? You don't live in New York, do you?
If the price of water tripled, a decent section of the population would struggle to afford it. That is the start and end of that debate, as far as I am concerned. I believe in the free market up until it starts starving people.
You are viewing this as a static situation (i.e. the price will stay high) and ignoring other ways for people in need to be assisted. Ensuring a shortage (by limiting price) isn't helpful.
Let the price float as needed and if you feel like some people are being priced out of the market, give them cash for them to spend as needed. Some people will need water. Other people will need food. Some folks will have both and instead will spend the money on gas for their generator.
Emergency cash assistance is a much better way to assist those in need and ensure that the market will rapidly adjust to provide resources in the right quantity and right location (due the the pricing signals).
> If every store tripled the price of bottled water you would have truckloads of water arriving within 24 hours with absolutely no government intervention at all
You mean "According to my preferred economic ideology if every store tripled the price of bottled water you should have ...", because it's fairly easy to check the historical records and see that this is definitely not what actually happens.
But by all means, don't let facts get in the way of your faith.
I know it was 4 hours ago but did you forget that we're talking about "price gouging" during disasters or some other event that disrupts normal supply lines?
Disrupted supply lines mean higher cost to deliver materials (longer routes, special equipment, etc). Higher prices encourages suppliers to expend the extra $$$ to deliver the goods. Or even new suppliers to enter the market (for example think about construction workers or tree removal companies in the wake of a large storm traveling to where the work is).
If the price can't change (legally) then suppliers will simply ignore the problem until conditions return to 'normal' thus ensuring shortages.
You: Really? There is no historical record of the market responding to increased prices?
Me: we're talking about "price gouging" during disasters or some other event that disrupts normal supply lines
Seems pretty clear what I was talking about. Your hypothesis about price gouging during emergencies doesn't have historical evidence.
I understand perfectly why you think it should work that way according to your ideology. I was pointing out that, in these circumstances, it doesn't match up with the data.
Plenty of other commenters, with knowledge of inventory logistics, have explained why.
Why do you assume that? During Sandy there was plenty of water to go around, and supplies were delivered. There was availability. Maybe if some asshole bought all the supplies available in a store then there might a be a problem, but guess what- no-one did.
If that situation had persisted it would actually be one of the rare situations where rationing makes sense- and that rationing would logically be controlled by the government. Which makes all the free market Rand-ians foam at the mouth- despite the fact that it makes sense.
Look Untog, on the one hand, we have what you saw with your own eyes.
On the other hand, I just finished my freshman year in economics, and when we draw a dotted line across the X of supply/demand, then there's this little triangle see? Shade it in. Yeah. So anyways that's what happened. BTW, there's no axis for "natural disaster" on my graph so clearly that's irrelevant. I don't know why you're bringing up red herrings.
Yes, of course, but it does not follow that those products are being optimally allocated by price like a normal economy. Normal economies adjust to produce more, natural disaster is a temporary state with different rules.
It becomes a public policy issue (we have too few and how to apportion in the short term) rather than an economic issue.
Rationing by the government makes randians "foam at the mouth" because as the government has proven over and over again, it is inept at thinking about every possible scenario that could exist, and rigid rules often fail to take into account a situation in which the best social good may be free market prices. Say there is a 2 gallon every two days ration. Now, if someone has their huge suv and uses it only to drive back and forth once a day between their house and school a mile a way but has an empty tank when the hurricane hit, under the ration they would be entitled to a lot of gas that they do not need. However, a private delivery business owner who makes all of his deliveries in his own car may use a tank a day, but now can only use a gallon a day. The deliveryman may be willing to pay a x% premium to make his deliveries, while the suv owner would not. People are going to be screwed in either case: either no gas available or cannot afford it. But people should at least be allowed to make the decision of whether or not to buy expensive gas.
If there was plenty of water and supplies were delivered, then there would be no incentive for the price increase and no need to have a law about it.
During Sandy, much of the price 'gouging' discussion was regarding gas supplies. The effect of price gouging laws was that people who had time waited in line and then sold their tank of gas on the secondary market where the price gouging law was not followed.
It is really hard to make the laws of supply and demand obey legislative commands.
"He even mentioned that Uber reported the supply of drivers went up 50%. Isn't that a major, important factor. The author just blows it off and calls the Uber evil."
I think people either don't realize, or at least haven't properly internalized, the fact that Uber doesn't employ drivers directly, but just connects drivers and riders and manages payment.
If Uber employed drivers directly, then complaining about high fares during a hurricane would make sense. It would be reasonable to say that they should just keep fares the same, put a lot of drivers out there, and maybe take a loss for the good of the community. I don't know if I'd be comfortable saying that they should, but I can understand the point of view, at least.
But with Uber simply acting as an intermediary, they have no direct control over drivers. If they want more drivers out there, they need to offer an incentive.
No it means that the resources will go the ones that have the means to pay the most. Those are not always the ones that need it most. There is reason why there was rationing during WW2.
Price "gouging" is actually a public service, it LITERALLY SAVES LIVES. It ensures that needed materials find their way to the people that need them the most. If I'm reasonably well stocked on batteries, and a business isn't allowed to raise prices during a hurricane, I have no dis-incentive from clearing off the shelf and buying all of them. However if the prices get jacked up, I won't buy them if I don't need them. It also provides an incentive and encourages people to be well prepared.
http://mises.org/daily/1593/Price-Gouging-Saves-Lives-in-a-H...